SAP's McDermott: We're not too rich for SMB blood

ORLANDO, Fla. -- SAP America CEO Bill McDermott is psyched up about the company's new mySAP CRM offering, which is available immediately. In the second part of McDermott's question-and-answer session with SearchSAP.com at the company's annual user event, McDermott pooh-poohs the idea that Microsoft Corp. is a serious CRM competitor, says SAP is convincing small customers that SAP software isn't too rich for their blood, and reflects on the state of xApps.

What's the state of your xApps initiative? We're focusing in RPM, resource project management, and NPI, new product innovation. If the market says it needs certain functionality, and we think a partner can do a more appropriate job putting that product to market, then we're certainly interested in expanding that [partner's] relationship with SAP. So, if we certify their app, and it makes sense for our customers, then it's a great way...

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for us to increase our bandwidth in what we can give to our customers. What does Microsoft's CRM initiative mean for SAP? First of all, Microsoft and SAP are partners. I would define our relationship as 90% partnership, and 10% competitive in the small to medium-sized business space and in the midmarket. Microsoft is a good customer; they use our software. In fact, we just expanded our business relationship with them today on a supply chain management solution. We're also customers of Microsoft. We use their products, and they're very good. On the partnership side, they're very big advocates of our NetWeaver story, because their penetration into the enterprise is very reliant on the NetWeaver-SQL relationship. Where we probably will run into each other is the SMB space, based on their acquisitions. And that's fine. There's a lot of elbow room in a market that has 1 million prospects and that's growing at about 21% on a year-over-year basis. So if we run into each other there, so be it. But it's not really an issue. What has customer response been like to SAP Business One, your SMB product? One example I would give you is [networking vendor] NextiraOne Federal. They took the product out of the box, had it [implemented] in two weeks, and were achieving a ROI in about four months' time. Sales have been going well. We've also doubled the size of our resellers. In fact, we signed 17 new resellers here at Sapphire. The No. 1 objection we hear is that we must be too expensive for a small or medium-size business. But once we show the customer that's not an issue, when they see the price point and they realize it's highly competitive, they want to go with us, because it's benefited 20,000 large customers. Did news of the PeopleSoft-J.D. Edwards possible merger surprise you? It really didn't surprise me. If you think about it, you might say the industry is getting just a little bit of gray around the temples. In an environment where revenues in the U.S. enterprise applications space are down 32%, PeopleSoft announced a very troubling quarter.

Their license revenue was off by $15 million versus what the analysts expected. JDE also announced a very difficult quarter, one in which they lost money. If you look at that kind of environment, you know that -- we're gaining 12 points of market share year over year -- the industry is consolidating. And the vendor base is consolidating. Fortunately for us, as the market leader, more and more customers are looking at SAP as a safe harbor, with a fully integrated suite [and] a highly accomplished customer base. So, in this environment, there are going to be very few winners and lots of losers. So I'm not surprised. Larry Ellison has said that he believes that SAP and Oracle will be the only two e-business application vendors left standing. Do you agree with that? Well, I'm not in the business of making predictions, but I know that we'll be around.

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